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MPs found last month that HMRC was in deep crisis, citing ‘endemic delays’ and staff so overstretched that more than half of calls go unanswered. Letters are ignored for months.

Now it has emerged that despite pledges to tackle underpayment, the tax office has been forced to write off massive unpaid bills.

Time for reform: Matthew Elliot said that tax shouldn't be so taxing that even the HMRC cannot keep on top of it, while calling for a simpler code

HMRC lost out most on VAT, writing off nearly £2billion in the last financial year alone.

Missing out on corporation tax, capital gains tax and national insurance as well as losses on alcohol and tobacco duties, and tax credits contributed to the total.

Matthew Elliott, of the TaxPayers’ Alliance, said: ‘We need systematic reform to produce a simpler tax code. Some of this uncollected tax will be down to the recession but there is clearly a long-term problem as well. Tax shouldn’t be so taxing that even HMRC can’t keep on top of it.’

The report said: ‘The system is far too complicated. The tax code has grown massively.

‘The handbooks of tax legislation have sharply increased in length, indicating more and more complexity. Tolley’s Corporation Tax guide is 1,897 pages long.

‘The tax code is so long that it would take Steve Woodmore, the world’s fastest speaker, over five days straight to get through it.’

Remissions are one of two ways in which HMRC gives up trying to collect unpaid tax. They are debts capable of recovery but not pursued on grounds of cost or because of a tax office error.

The second, write-offs, are debts with no practical means of recovery, such as from a firm which has gone out of business.

A spokesman for HMRC said: ‘We collect 99 per cent of debt that we are able to. Ninety per cent of money owed that is written off is caused by company liquidations.’